Macquarie Group 2014 Annual Report Financial 2014 2014 Annual Financial Report macquarie.com.au Macquarie Group For personal use only MACQUARIE GROUP LIMITED ACN 122 169 279 The Holey Dollar Macquarie Group Contact details 2014 Annual Financial Report In 1813 Governor Lachlan Macquarie Macquarie Group Limited’s 2014 Annual Report consists of Macquarie Group Head Office two documents – the 2014 Annual Review and the 2014 Annual No.1 Martin Place overcame an acute currency shortage Financial Report. Sydney NSW 2000 by purchasing Spanish silver dollars This 2014 Macquarie Group Annual Financial Report complies Australia with reporting requirements and contains the statutory Tel: +61 2 8232 3333 (then worth five shillings), punching financial report. It includes Macquarie’s Corporate Governance the centres out and creating two new Statement, the Directors’ Report including the Remuneration Registered Office coins – the ‘Holey Dollar’ (valued at Report and the full financial statements. Macquarie Group Limited The 2014 Annual Review contains a report from the Chairman Level 7, No.1 Martin Place five shillings) and the ‘Dump’ (valued and Managing Director on Macquarie’s business and Sydney NSW 2000 at one shilling and three pence). operational highlights. It is not a concise report prepared under Australia section 314 (2) of the Corporations Act. Macquarie Group has Tel: +61 2 8232 3333 not prepared a concise report for the 2014 financial year. This single move not only doubled Fax: +61 2 8232 4330 the number of coins in circulation but If you would like a copy of the 2014 Annual Review please call us on +61 2 8232 0032 or visit increased their worth by 25 per cent macquarie.com.au/investorrelations. and prevented the coins leaving the colony. Governor Macquarie’s creation 2014 Annual General Meeting of the Holey Dollar was an inspired Macquarie Group’s 2014 Annual General Meeting will be held at solution to a difficult problem and 10:30am on Thursday 24 July 2014 at the Sheraton on the Park for this reason it was chosen as the (Grand Ballroom), 161 Elizabeth Street, Sydney, NSW 2000. symbol for Macquarie Group. Details of the business of the meeting will be contained in the Notice of Annual General Meeting, to be sent to shareholders separately. For personal use only The Macquarie name and Holey Dollar device are registered trade marks of Macquarie Group Limited. Macquarie Group Limited and its subsidiaries 2014 Annual Financial Report macquarie.com.au Macquarie Group Limited 2014 Annual Financial Report Corporate Governance Statement 3 Diversity Report 11 Environmental, Social and Governance Report 14 Risk Management Report 23 Directors’ Report 37 – Remuneration Report 45 – Schedule 1 88 – Schedule 2 93 Financial Report 94 – Income Statements 95 – Statements of comprehensive income 96 – Statements of financial position 97 – Statements of changes in equity 98 – Statements of cash flows 100 – Notes to the financial statements 102 – Directors’ declaration 212 – Independent auditor’s report 213 Ten year history 215 Additional investor information 216 Glossary 225 For personal use only 1 Macquarie Group Limited and its subsidiaries 2014 Annual Financial Report macquarie.com.au This page has been intentionally left blank. For personal use only 2 Corporate Governance Statement company has followed the governance recommendations of Macquarie’s approach to Corporate the ASX Corporate Governance Council (ASX Governance Recommendations) during the reporting period. Macquarie's Macquarie’s approach to governance, which has remained corporate governance remains consistent with the ASX largely consistent over time, is to: Recommendations. A summary of the ASX – promote the long term profitability of Macquarie while Recommendations and reference to the applicable prudently managing risk Macquarie governance practice is available on Macquarie’s – drive superior and sustainable shareholder value over website at macquarie.com.au the long term through the alignment of the interests of Macquarie as a non-operating holding company of a shareholders and staff licensed Australian bank, Macquarie Bank Limited – meet stakeholder expectations of sound corporate (Macquarie Bank), is regulated by the Australian Prudential governance as part of Macquarie’s broader Regulation Authority (APRA). APRA’s prudential standards responsibility to clients, shareholders, investors and include governance requirements. Macquarie also has the communities in which it operates. subsidiaries that are supervised by regulators in the overseas Macquarie recognises that a key factor in delivering long jurisdictions in which they operate. The notes to Macquarie’s term shareholder returns is providing superior services to financial statements include a list of material subsidiaries of clients. Macquarie recruits high quality staff and expects the company. staff to uphold the company’s Goals and Values. Macquarie's corporate governance framework continues to Macquarie Group Limited (Macquarie) is a global financial evolve to respond to regulatory changes in the global services provider and its shares are listed on the Australian markets in which it operates. Securities Exchange (ASX). As an ASX-listed company, Macquarie is required to report on the extent to which the Corporate Governance framework For personal use only 3 Macquarie Group Limited and its subsidiaries 2014 Annual Financial Report macquarie.com.au Corporate Governance Statement continued Board oversight Director Independence The primary role of the Board is to promote the long-term Macquarie recognises that independent directors have an health and prosperity of Macquarie. The Macquarie Board important role in assuring shareholders that the Board is consists of eleven Voting Directors, ten of whom are able to act in the best interests of Macquarie and independent. Kevin McCann, an Independent Director, is independently of Management. Chairman. Nicholas Moore, Macquarie’s Managing Director The independence of directors is reviewed annually by the and Chief Executive Officer (CEO), is the only executive Board Governance and Compliance Committee (BGCC). Board member. Based on Macquarie’s criteria for assessing director During the year, Gary Banks, Patricia Cross and Nicola independence, each independent director is asked to Wakefield Evans were appointed to the Board, and confirm whether they have any material interests or Catherine Livingstone and John Niland retired on 25 July relationships with Macquarie, other than as a director. 2013 and 31 December 2013, respectively. Schedule 1 of At its meeting in March 2014, the BGCC determined that the Directors' Report includes when each Voting Director while some Directors noted commercial relationships joined the Board. between Macquarie and other large companies of which The table below sets out the current composition of the they are a director as well as professional service providers Board and the membership of each Board Committee. of which, within the last three years, they were a partner, Details of each Voting Director’s experience are summarised there were no interests or relationships that could interfere in Schedule 1 of the Directors’ Report. with the Non-Executive Director's ability to act in the best interests of Macquarie and independently of Management. Macquarie’s Constitution sets out requirements concerning Each Director's experience and directorships are set out in the setting of board size, meetings, election of directors Schedule 1 of the Directors' Report. The BGCC confirmed and the powers and duties of directors. In accordance with that, excluding the CEO, all directors continued to be the Constitution, the Board has resolved that the maximum independent. number of Voting Directors is currently eleven. The criteria used to assess independence, including A copy of the Constitution is available on Macquarie’s guidance for determining materiality, are reviewed annually website. and are available on Macquarie’s website. Decision-making authority Directors are able to consult independent experts at The Board has reserved certain matters for its approval Macquarie’s expense, subject to the estimated costs and has delegated specific authorities to its various being approved by the Chairman in advance as being Board Committees. The Managing Director, who is also reasonable, and also have unlimited access to senior Macquarie’s CEO, has been granted general authority for management of Macquarie. those matters not reserved for the Board or a Board Board Committees Committee. Macquarie’s Executive and Operations Review Committees, appointed by the Managing Director, operate Macquarie’s five standing Board Committees assist the as management committees to assist in the exercise of the Board in its oversight role. Each Board Committee has an Managing Director’s delegated authority. independent director as its Chairman. All Board members are sent Board Committee meeting agendas and may attend The CEO, the Chief Risk Officer and the Chief Financial any Board Committee meetings. Subsequent to each Board Officer report to the Board at each monthly Board meeting. Committee meeting, the minutes are included in the Board In addition to regular reporting from Management, the Board papers and presented to the Board by the respective Board has unlimited access to senior management as well as Committee Chairmen. external advisers. The Audit, Governance and Compliance, Nominating and The Board Charter, which is available on Macquarie’s Remuneration Committees comprise members